Assumptions & Methodology
Every rate, rule, and modeling choice behind the MoneyOnFIRE simulation — and where the numbers come from.
Build My PlanHow the simulation works
MoneyOnFIRE runs a month-by-month simulation of your financial life — income, taxes, expenses, debt payments, investment contributions, and growth — from today until you reach financial independence and beyond. Every variable below is applied each month, so the projection captures compounding, changing tax brackets, debt payoff milestones, and shifting cash flow over time.
Most assumptions have sensible defaults but can be adjusted to match your situation. The defaults below are what the engine uses if you don't override them.
Inflation
All projections are adjusted for inflation so you see real purchasing power, not nominal dollars that overstate what your money can buy.
Applied to living expenses, housing costs, and most recurring costs. Based on the Federal Reserve's long-run target.
Tuition has historically outpaced general inflation. Applied separately to all college cost projections.
Federal tax brackets and standard deduction are assumed to adjust at the general inflation rate each year.
Investment returns
Growth rates are applied to all investment accounts. Returns compound monthly within the simulation.
Nominal annual return based on long-run S&P 500 historical performance. Applied to 401(k), IRA, Roth, and brokerage accounts.
Annual property value growth for investment properties. Aligns with long-term residential real estate trends.
Investment growth is compounded monthly, not annually, for more realistic projections.
Retirement & withdrawal
The simulation uses a safe withdrawal rate to determine how much income your portfolio can sustain in retirement.
Based on the Trinity Study (Bengen, 1994). At a 75/25 equity/bond allocation, this has a 98% historical success rate over 30-year periods.
Your FI number is the portfolio size needed to cover post-tax living expenses at the safe withdrawal rate.
Income & career growth
Salary and compensation are projected forward using growth rates you can customize.
Reflects typical career progression. User-adjustable per person.
Annual increase in the value of new RSU grants. User-adjustable.
Growth rate applied to unvested and vested RSU shares. User-adjustable.
Tax modeling
The simulation calculates federal and state taxes each year based on your income, filing status, and deductions.
Brackets inflate at 2% annually to model expected adjustments.
Modeled based on your selected state of residence.
Applied to brokerage account withdrawals and RSU sales.
Vested RSUs are taxed as ordinary income in the year they vest. Subsequent gains are capital gains.
Contribution limits
Retirement account contribution limits follow current IRS rules and are projected to grow with inflation.
2026 IRS limit. Grows at 2% annually in the simulation.
Includes $8,000 catch-up contribution for those 50 and older. Ages 60–63 can contribute up to $35,750 if the plan allows.
2026 IRS limit for Traditional and Roth IRA contributions.
Contribution caps are assumed to increase annually in line with inflation.
Debt classification
Debts are classified relative to expected investment returns and slotted into the financial waterfall accordingly.
Baseline interest rate used to classify debt as high, medium, or low. Based on the current prime rate.
Credit cards, high-rate personal loans. Paid down aggressively before the full emergency fund.
Student loans, auto loans. Paid down after the emergency fund, before maxing retirement accounts.
Mortgages, subsidized loans. Minimum payments only — surplus is invested instead.
Within each tier, extra payments go to the highest-rate balance first to minimize total interest paid.
College costs
College costs are projected using national averages and adjusted for college-specific inflation.
Tuition, fees, room and board. Based on NCES data.
Tuition, fees, room and board at public universities for non-residents.
Tuition, fees, room and board at private four-year institutions.
Applied independently from general inflation to all college cost projections.
Estimated using household income brackets and FAFSA parent asset assessment rate of 5.64%.
Housing
Housing costs are modeled based on whether you rent or own, including mortgage amortization for homeowners.
User-adjustable. Reflects recent market rates.
User-adjustable. Standard amortization schedule.
Rent increases at the general inflation rate.
Emergency fund
The simulation builds an emergency fund as part of the financial waterfall before directing cash to investments.
Built first, before high-interest debt paydown.
Built after high-interest debt is cleared, before medium-interest debt and investment maximization.
Sources
Trinity Study — Bengen, W.P. (1994). "Determining Withdrawal Rates Using Historical Data." Updated analyses confirm 4% SWR with 95–98% success over 30-year periods depending on asset allocation.
National Center for Education Statistics (NCES) — Digest of Education Statistics, most recent academic year data for tuition, fees, room, and board.
Internal Revenue Service (IRS) — irs.gov. Updated annually for 401(k), IRA, and standard deduction limits.
Long-run S&P 500 historical average. The 8% nominal figure includes dividends reinvested and reflects roughly 6% real return after inflation.
FAFSA methodology — parent asset assessment rate of 5.64%, income-based Expected Family Contribution (EFC) brackets.
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Put these assumptions to work with your own financial data and get a personalized FI plan.
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